CoStar Group (NASDAQ: CSGP) Plunges 2.51% as Zillow Legal Dispute and Operational Challenges Weigh on Stock

CoStar Group Inc. (NASDAQ: CSGP) fell 2.51% on Friday, marking its fifth consecutive day of declines with a cumulative drop of 10.87% over the past five trading sessions. The stock hit an intraday low of $80.77, its lowest level since June 2025, as legal and operational challenges weighed on investor sentiment.

The ongoing legal battle with Zillow has emerged as a key catalyst for the stock’s volatility. CoStar filed a high-profile lawsuit accusing Zillow of copyright infringement, alleging the platform distributed over 46,000 of its copyrighted real estate images more than 250,000 times without proper licensing. The case, seeking damages exceeding $1 billion, has raised concerns about CoStar’s ability to protect its intellectual property and maintain market access. While Zillow has not publicly responded, the litigation has heightened uncertainty among investors, exacerbating downward pressure on the stock.

Financial performance has also contributed to the sell-off. Despite a 15.2% year-over-year revenue increase to $781.3 million in Q2 2025, CoStar’s net margin of 3.57% remains below industry averages. A P/E ratio of 324.6 and PEG ratio of 3.9 suggest the stock is trading at a premium to earnings, prompting skepticism about its valuation. Analysts remain divided, with ratings ranging from "Strong Buy" to "Sell," and a consensus price target of $94.15. Upgrades from JPMorgan and RBC contrast with cautious "Hold" or "Neutral" calls, reflecting mixed confidence in the company’s ability to navigate legal and macroeconomic headwinds.

Insider activity has further fueled concerns. Executives, including Frederick G. Saint and Chief Accounting Officer Cynthia Cammett Cann, sold shares totaling $4.78 million in the last 90 days, reducing their holdings by 7.26% and 7.31%, respectively. Institutional investors have also adjusted stakes, with Golden State Wealth Management increasing holdings by 6.3% but remaining cautious. The stock’s low trading volume, down 65% from average levels, underscores reduced investor engagement amid uncertainty.

Strategic moves, such as the acquisition of Australia’s Domain platform and expansion in multifamily analytics, highlight CoStar’s efforts to diversify revenue streams. However, broader sector challenges—including soft U.S. home price growth and regulatory scrutiny—pose long-term risks. The company’s reliance on commercial real estate data, a segment already strained by economic shifts, adds to investor caution. With the Q3 earnings report due on October 28 and the Zillow lawsuit unresolved, the stock’s trajectory will depend on its ability to address these headwinds while demonstrating sustainable profitability.